The Telegraph
Since 1st March, 1999
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Bourses unite to fight illegal badla funding

Mumbai, Aug. 29: In a rare show of unity the two arch rivals—the Bombay Stock Exchange and the National Stock Exchange (NSE)—have joined hands to warn operators using the unofficial badla financing route.

Reports of a few heavyweight operators using the badla vehicle to carry forward trades have triggered the joint move, the exchanges said.

In a statement, the two exchanges said that all such transactions would be outside the regulations prescribed by stock exchanges and any market participant found to be engaging in such activities would invite disciplinary action.

The exchanges were acting on the basis of reports appearing in a section of the press, they added.

In case of disputes arising out of such transactions, the guarantee mechanism of the stock exchange or the investor protection fund of the stock exchanges would not cover or entertain such disputes or defaults, the exchanges warned.

On being asked whether the two exchanges have encountered such transactions, they declined to comment saying that it is a pro-active move to prevent market mishaps.

“We have taken several investor-related and corporate governance initiatives jointly in the past. In fact, a healthy capital market is what the regulator and both exchanges strive for,” an official from one of the exchanges said.

It is believed that Sebi, the apex capital market regulator, swung into action after hearing reports of illegal badla trading in certain stock bourses. However, exchange officials said the move was primarily triggered after reports appeared in a section of the press that some of the market participants may be engaging in unofficial badla through some form of private funding.

“It is understood that this mechanism is utilised to enable participants to carry forward their positions. In this connection it is advised that deferral or badla is banned by the Securities and Exchange Board of India, and any such transaction entered into would be illegal,” the two premier stock bourses said in the joint statement.

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